Why is the WA1 share price crashing 12% today?

This high-flying stock is having its wings clipped today. What's happening?

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The WA1 Resources Ltd (ASX: WA1) share price has returned from its trading halt with a thud.

In morning trade, the niobium explorer's shares are down 12% to $16.65.

Why is the WA1 share price crashing?

Investors have been hitting the sell button today after the company's management decided to take advantage of its meteoric share price to raise funds.

According to the release, WA1 Resources has received firm commitments for a placement of 3.5 million new fully paid ordinary shares to raise $60 million before costs.

The company will be raising these funds at a placement price of $17.00 per new share, which represents a 9.8% discount to where the WA1 share price last trade. It also represents an 11.8% discount to the 10-day volume weighted average price.

Why is the company raising funds?

The company advised that the funds raised from the placement will primarily support activities at the impressive Luni deposit and the broader West Arunta Project.

This includes ongoing mineral resource and extensional drilling, process testwork and flowsheet development, permitting, and project development activities. It also notes that the placement will support other exploration, administration/corporate costs, and general working capital.

WA1's managing director, Paul Savich, was pleased with the success of the placement. He commented:

This Placement will support the Company's efforts to increase momentum and continue to unlock the full value of the Luni discovery. The strong demand from new and existing institutions around the world reflects the quality of the recent Mineral Resource estimate, its tier-1 location and the significant potential for future growth.

Savich also revealed that the company is undertaking further drilling at Luni, which could increase the already massive mineral resource. He adds:

Two drill rigs are currently operating at Luni to increase confidence in, and extend, the Mineral Resource, along with providing further samples for metallurgical testwork. This placement will also allow the Company to accelerate its project development workstreams and expand exploration activities across the greater tenement package.

Despite today's pullback, the WA1 share price remains up 220% since this time last year. This has been driven by excitement over its Luni deposit.

In its quarterly activities update, the company points out that its "MRE highlighted Luni as the world's most significant niobium discovery in more than 70 years and one of Australia's major critical minerals deposits."

The initial inferred mineral resource contains 200 Mt at 1.0% Nb2O5 with a high grade subset of 53 Mt at 2.1% Nb2O5 (at a 0.25% Nb2O5 lower cut-off). It notes that this confirms the tier-1 scale and grade of Luni.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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